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Metso Corporation (HEL:METSO), which is in the machinery business, and is based in Finland, saw significant share price volatility over the past couple of months on the HLSE, rising to the highs of €31.31 and falling to the lows of €26.05. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Metso’s current trading price of €26.05 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Metso’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Metso
What’s the opportunity in Metso?
According to my valuation model, the stock is currently overvalued by about 22.54%, trading at €26.05 compared to my intrinsic value of €21.26. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Metso’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Metso generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 60% over the next couple of years, the future seems bright for Metso. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? METSO’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe METSO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on METSO for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for METSO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.